Multiple Choice Questions

1. Which of the following statements is false concerning forms of business organization?

a. A sole proprietorship is an easy type of business to form.

b. It is easier for a corporation to raise large sums of money than it is for a sole proprietorship or partnership.

c. A corporation has tax advantages over the other forms of business organization.

d. Owners of sole proprietorships and partnerships have personal liability for the debts of the business while owners of corporations have limited legal liability.

2. Which of the following statements regarding business activities is true?

a. Operating activities involve buying the assets that enable a company to generate revenue.

b. Investing activities center around earning interest on a company’s investments.

c. Companies spend a relatively small amount of time on operating activities.

d. Financing activities include obtaining the funds necessary to begin and operate a business.

3. At December 31, Pitt Inc. has assets of $8,500 and liabilities of $6,300. What is the stockholders’ equity for Pitt at December 31?

a. $14,700

b. $10,700

c. $8,500

d. $2,200

4. Which of the following is not one of the four basic financial statements?

a. Auditor’s report

b. Income statement

c. Balance sheet

d. Statement of cash flows

5. What type of questions do the financial statements help to answer?

a. Is the company better off at the end of the year than at the beginning of the year?

b. What resources does the company have?

c. What did a company use its cash for during the year?

d. All of the above.

6. Which of the following is not shown in the heading of a financial statement?

a. The title of the financial statement

b. The name of the auditor

c. The name of the company

d. The time period covered by the financial statement

7. At December 31, Marker reported the following items: cash, $12,200; inventory, $2,500; accounts payable, $4,300, accounts receivable, $3,500; common stock, $5,900; property, plant, and equipment, $10,000; interest payable, $1,400; retained earnings, $16,600. What is the total of Marker’s current assets?

a. $28,200

b. $18,400

c. $18,200

d. $13,900